BMO Capital analyst Daniel Salmon said while Q3 revenues estimates for Amazon.com (NASDAQ: AMZN) look appropriate they are raising their already above consensus estimates for 4Q due to increased confidence in Prime growth. The firm reiterated an Outperform rating and raised its price target to $900.00 (from $875.00).

"We believe there were 26 million more Prime members heading into 2H16 compared to 2H15, very significant due to the fact that Prime members tend to spend more than non-Prime members," Salmon said. They now estimate there were 76 million Prime members as of 2Q16 and expect this to grow to 93 million by year-end 2016. They believe the Prime member base can reach 163 million by FY18E.

The firm now estimates 4Q16 revenue of $46.0B, up from $45.6B, and ahead of the Street's $44.6B. The firm rasied FY 2016 EPS estimates from $5.61 to $5.86 and FY 2017 EPS from $9.97 to $10.29/

They estimate Amazon will record ~$6.9 billion of Prime subscription fees as revenue in 2016E, up from ~$4.5 billion last year. They believe this number could approach ~$14 billion by FY18E.

They believe the majority of Amazon's unearned revenue, additions to unearned revenue, and amortization of unearned revenue are due to Prime subscription fees.

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